Professional Documents
Culture Documents
Medical Tourism:
Global Competition in Health Care
by
Devon M. Herrick
l Apollo Hospital in New Delhi, India, charges $4,000 for cardiac surgery, compared to about
$30,000 in the United States.
l Hospitals in Argentina, Singapore or Thailand charge $8,000 to $12,000 for a partial hip re-
placement — one-half the price charged in Europe or the United States.
l Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee
replacement that runs $30,000 in the United States.
l A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500
in the United States.
In 2006, the medical tourism industry grossed about $60 billion worldwide. McKinsey & Com-
pany estimates this total will rise to $100 billion by 2012.
Patients who are not familiar with specific medical facilities abroad can coordinate their treatment
through medical travel intermediaries. These services work like specialized travel agents. They investi-
gate health care providers to ensure quality and screen customers to assess those who are physically well
enough to travel. They often have doctors and nurses on staff to assess the medical efficacy of procedures
and help patients select physicians and hospitals.
Prices for treatment are lower in foreign hospitals for a number of reasons. Labor costs are lower,
third parties (insurance and government) are less involved or not at all involved, package pricing with
price transparency is normal, there are fewer attempts to shift the cost of charity care to paying patients,
there are fewer regulations limiting collaborative arrangements between health care facilities and physi-
cians, and malpractice litigation costs are lower.
How can patients ensure the medical treatment they will receive will be of high quality?
l Foreign health care providers often have physicians with internationally respected credentials,
many of them with training in the United States, Australia, Canada or Europe.
l More than 120 hospitals abroad are accredited by the Joint Commission International (JCI), an
arm of the organization that accredits American hospitals participating in Medicare; another 20
are accredited through the International Standards Organization; and some countries are adopt-
ing their own accrediting standards.
l Some foreign hospitals are owned, managed or affiliated with prestigious American universi-
ties or health care systems such as the Cleveland Clinic and Johns Hopkins International.
l Several companies are building and operating hospitals in Mexico that meet American stan-
dards, largely for American (and wealthy Mexican) patients.
l Finally, patients can also use online communities to get information on the safety and quality
of medical providers by reading the testimonies of other patients who have had surgery abroad.
Medical tourism is only one aspect of the way globalization is changing the U.S. health care
system. Apart from patient travel, many medical tasks can be outsourced to skilled professionals abroad
when the physical presence of a physician is unnecessary. This can include interpretation of diagnostic
tests and long-distance international collaboration, particularly in case management and disease manage-
ment programs, because of the availability of information technology.
If American health care consumers are to benefit to the fullest extent from global health care com-
petition, federal and state policies must allow them to take advantage of the opportunities. Legal reforms
policymakers should consider include recognizing licenses and board certifications from other states and
countries. The federal Stark laws limiting relationships between physicians and hospitals need to be modi-
fied to let health care providers offer integrated medical services, including follow-up care for patients
returning from treatment abroad. Finally, the federal and state governments should lead by example by
allowing Medicare and Medicaid programs to send willing patients abroad. Medicare in particular would
benefit from cost savings due to its large volume of orthopedic and cardiac procedures.
Medical Tourism: Global Competition in Health Care
Introduction
Global competition is emerging in the health care industry. Wealthy
patients from developing countries have long traveled to developed countries
for high quality medical care. Now, growing numbers of patients from devel-
oped countries are traveling for medical reasons to regions once characterized
as “third world.” Many of these “medical tourists” are not wealthy, but are
seeking high quality medical care at affordable prices. To meet the demand,
entrepreneurs are building technologically advanced facilities outside the
United States, using foreign and domestic capital. They are hiring physi-
cians, technicians and nurses trained to American and European standards, and
where qualified personnel are not available locally, they are recruiting expatri-
ates.
FIGURE I
$100 billion
2004 2012
also potential savings for insured patients who bear some of the cost through
copayments and deductibles. For example, if a procedure cost $4,000 less
in another country, a patient required to pay 20 percent of the cost (through a
copayment) would save $800 out of pocket.
Where Do Patients Seek Treatment? Most American medical tour-
ists seek treatment in Mexico and other Latin American countries. Clinics in
Brazil and Argentina have offered low-cost cosmetic surgery for years.13 India
and Thailand are now promoting their high-tech facilities for more serious
procedures, including hip and knee replacements and cardiac surgery.14 Other
destinations include Singapore, Belgium and South Africa.15 Many Northern
and Western Europeans travel to Central and Eastern Europe for low-cost
medical and dental services.16 [See the sidebar, “Medical Tourism Destina-
tions.”]
Cross-Border Medical Tourism. It may be impractical for sick
Americans to travel to faraway places like India and Thailand for major sur-
gery. But many types of medical services are available nearby — in Mexico
and elsewhere in Latin America .
Mexico. Mexican physicians have a thriving business treating Ameri-
“Most American medi- can (and Canadian) retirees searching for of low-cost drugs, dental care and
cal tourists seek treatment
in Mexico and other Latin physician services.17 Prices in Mexico are about 40 percent lower than in the
American countries.” United States. Cash-paying, uninsured Americans can find better deals on
procedures in Mexico, including price quotes and package prices, which most
American hospitals do not offer.18
Indeed, some Arizona retirement communities have regular bus tours
to take residents across the Mexican border for prescription drugs and dental
care.19 Some health plans in Southern California offer lower premiums and
copayments to patients who use network providers across the border in Ti-
juana.20 Facilities are being built in Mexican border towns to take advantage
of these plans.21
Dallas-based International Hospital Corp. operates four Mexican
hospitals, three close to the U.S. border and one near Mexico City (it has other
facilities in Brazil and Costa Rica).22 A Mexican partnership called Christus
Muguerza is building and operating hospitals in Mexico that meet American
standards. It has identified 40 communities along the U.S.-Mexican border
where it intends to build facilities.23
Some 40,000 to 80,000 American seniors live in Mexico. In addi-
tion to health care at lower prices (Medicare does not cover care outside the
United States), a number of them receive nursing home care at bargain prices.
In most areas of the United States, the cost of nursing home care can easily
surpass $60,000 per year. But in Mexico, high quality long-term care costs
only about one-fourth as much. For about $1,300 per month, a senior can get
a studio apartment that includes laundry service, cleaning, meal preparation
and access to around-the-clock nursing care.24
The National Center for Policy Analysis
India. Despite the long travel time involved, India is a popular destination for
medical tourists. It arguably has the lowest cost and highest quality of all medical tourism
destinations, and English is widely spoken. Several hospitals are accredited by the Joint
Commission International (JCI) and staffed by highly trained physicians. Prices can be
obtained in advance, and many hospitals bundle services into a package deal that includes
the medical procedure and the cost of treating any complications.1 Hotel accommodations
are extra, but hospitals often have hotel rooms or can offer discounts for hotels nearby.
Thailand. This popular destination for medical tourists rivals India in price and
quality. Thailand’s large tourist industry is one reason it has a better infrastructure and less
noticeable poverty than India.2 Prices are typically not as low as in India, and Thai hospi-
tals do not offer fixed pricing. However, food and lodging during recuperation will likely
be less expensive than in India due to Thailand’s competitive tourism industry.3 Bangkok’s
Bumrungrad International Hospital is a world-class private health care facility built for
wealthy Thais, but foreigners comprise more than one-third of its patients.
Singapore. English is also widely spoken in this former British colony, located ap-
proximately 1,000 miles south of Bangkok. Singapore has modern, high-quality hospitals
and is home to three hospitals accredited by the JCI.4 Prices are higher than in Thailand or
India but are much lower than in the United States.
Central and South America. Mexico has been popular for some time with Ameri-
can patients seeking primary and dental care. But to attract cash-paying American patients
for surgical services, health care systems are building hospitals and clinics with the high
level of service and amenities that American patients have come to expect. For instance,
Americans expect professional medical staff and upscale private rooms in clean, modern
facilities. They also expect high-tech equipment that American hospitals would possess.
l Costa Rica is best known for quality dental work, with prices one-third to one-
half of those in the United States.5
Medical Tourism: Global Competition in Health Care
l Argentina and Brazil have long been known for cut-rate plastic surgery, and
more advanced treatments are becoming available.7
Plenitas is a Buenos Aires-based boutique clinic that arranges medical travel.8 Al-
though most of the services provided are cosmetic surgeries, it also offers in vitro fertiliza-
tion and bariatric (weight loss) surgery.9 Nine Brazilian organizations have established a
health care consortium to market Brazil as a medical tourism destination in various coun-
tries.10
l Germans favor Szczecin, Poland, less than 100 miles from Berlin, for low-cost,
high-quality dental work.
l Sopron, Hungary, less than an hour’s drive from Vienna, Austria, caters to
medical tourists. Sopron has more than 200 dentists and 200 optometrists, 10
times as many as would be expected in a town of 20,000 people.11
1
Information from PlanetHospital Web site; and Malathy Iyer, “India Out to Heal the World,” Times of
India, October 26, 2004.
2
Conversation with Tom Borta, PlanetHospital’s vice president client relations, September 2006. India
has a shortage of hotels, and its infrastructure is notoriously poor. See “Tourism without infrastructure?”
December 2006. Available at http://healthabroad.net/blog/?p=88. Access verified June 2007. Also see
“Shortage of 1.5 Lakh Hotel Rooms: Govt,” ZeeNews.com, November 30, 2006. Available at http://
www.zeenews.com/znnew/articles.asp?rep=2&aid=339065&ssid=50&sid=BUS. Access verified June 22,
2007.
3
Information from PlanetHospital Web site.
4
Ibid.
5
Jeff Schult, “A New Smile (for Half the Price),” Northeast (Hartford Courant), May 23, 2004. Available
at http://www.tftb.com/beautyfromafar/. Accessed April 30, 2007. This work was later expanded into
the book by Jeff Schult, Beauty from Afar: A Medical Tourist’s Guide to Affordable and Quality Cosmetic
Care Outside the U.S. (New York: Stewart, Tabori & Chang, 2006).
6
See http://www.PlasticSurgeryJourneys.com.
7
“Oliver Balch Charts the Irresistible Rise of the Tango-and-Boob-Job Break in Argentina,” Guardian
Unlimited, October 24, 2006.
8
Ibid.
9
Web site http://www.plenitas.com.
10
Marina Sarruf, “Brazil Wants to Make Medical Tourism a One-Million Dollar Industry,” Brazzil Maga-
zine, February 8, 2007.
11
Sharon Reier, “Medical Tourism: Border Hopping for Cheaper and Faster Care Gains Converts,” Inter-
national Herald Tribune, April 24, 2004.
The National Center for Policy Analysis
PlanetHospital
PlanetHospital is a medical tourism intermediary that screens pro-
tional health care providers. The company only refers patients to providers
tHospital has identified quality health care providers, it works closely with
them to ensure they maintain quality and provide superior patient services.
If the providers fail to do so, they are dropped from the referral network.
medical history.
manager from the destination country to make arrangements for the proce-
and airport transfers. Case managers attend to all needs that arise while the
percentage of the fees patients pay for medical care, PlanetHospital charges
FIGURE II
Cost of Rhinoplasty
(thousands of U.S. dollars)
$4,500
$3,500
$850
Source: Sarah Dawson with Keith Pollard, “Guide to Medical Tourism,” Treat-
mentAbroad.net, 2007; and “Cosmetic Plastic Surgery Costs,” available
at http://www.cosmeticplasticsurgerystatistics.com/costs.html.
FIGURE III
51%
13%
Source: Sarah Dawson with Keith Pollard, “Guide to Medical Tourism,” Treat-
mentAbroad.net, 2007; and “Cosmetic Plastic Surgery Costs,” available
at http://www.cosmeticplasticsurgerystatistics.com/costs.html.
10 The National Center for Policy Analysis
TABLE I
U.S. U.S.
Procedure Retail Price* Insurers’ Cost* India** Thailand** Singapore**
Angioplasty $98,618 $44,268 $11,000 $13,000 $13,000
Heart bypass $210,842 $94,277 $10,000 $12,000 $20,000
Heart-valve
“Cash-paying patients pay replacement $274,395 $122,969 $9,500 $10,500 $13,000
higher prices than insurers in (single)
most U.S. hospitals.” Hip replacement $75,399 $31,485 $9,000 $12,000 $12,000
Knee replacement $69,991 $30,358 $8,500 $10,000 $13,000
Gastric bypass $82,646 $47,735 $11,000 $15,000 $15,000
Spinal fusion $108,127 $43,576 $5,500 $7,000 $9,000
Mastectomy $40,832 $16,833 $7,500 $9,000 $12,400
*
Retail price and insurers’ costs represent the mid-point between low and high ranges.
**
U.S. rates include at least one day of hospitalization; international rates include
airfare, hospital and hotel.
Sources: Subimo (U.S. rates); PlanetHospital (international rates), cited in Unmesh
Kher, “Outsourcing Your Heart,” Time, May 21, 2006.
patients compare prices. [For examples, see Table I.] Even providers who
do not offer fixed pricing will provide reasonably accurate price quotes. As a
result, medical centers and clinics that treat large numbers of medical tourists
routinely quote prices in advance and look for ways to reduce patients’ costs.46
Few Cross-Subsidies. In American full-service nonprofit general hos-
pitals, revenues from treatments for some patients are used to cover the costs
of providing treatments to other patients. This cross-subsidization is possible
because some medical procedures produce more revenue than it costs to pro-
vide them. For example, the revenue from routine heart catheterization pro-
cedures or diagnostic imaging systems in a community hospital might be used
to subsidize indigent health care or the cost of operating the emergency room.
This means that a hospital’s charges for the heart procedure more than cover
its costs, but its charges for emergency room care do not cover those costs. If
there is no competition for the business of heart patients in the hospital’s ser-
vice area, it can cross-subsidize without losing revenue.
However, a provider who does not cross-subsidize could offer the
cardiac treatment for a lower price or could make a profit charging the same
12 The National Center for Policy Analysis
price. In the United States, such providers have emerged in the form of highly
efficient specialty hospitals. Nonprofit community hospitals complain that
specialty hospitals skim off lucrative surgeries but do not provide the services
that community hospitals do, such as emergency departments and charity care
for the uninsured. This has led to a moratorium on new specialty hospitals in
the Medicare program.47
Streamlined Services. Some foreign medical providers operate highly
efficient “focused factories.” These are specialty clinics and hospitals where
tasks and procedures have been streamlined for the highest efficiency — simi-
lar to the way a Toyota automotive plant operates.48 For example, Fortis
Healthcare’s Rajan Dhall Hospital in New Delhi uses a business model that
combines the personalized service of the hotel industry with the industrial
processes of an automaker — both industries in which its senior executives
have experience.49 Jasbir Grewal, Rajan Dhall’s vice president for operations,
spent years working for the Hilton hotel chain. He describes their hospital as
“a hotel providing clinical medical excellence.” Fortis chairman Harpal Singh,
who came from the automotive industry, emphasizes the need to streamline
processes in such a way that procedures can be performed quickly and effi-
ciently.50
Limited Malpractice Liability. Malpractice litigation costs are also
lower in other countries than in the United States. While American physicians
in some specialties pay more than $100,000 annually for a liability insurance
policy, a physician in Thailand spends about $5,000 per year. Thailand does
not compensate victims of negligence for noneconomic damages, and malprac-
tice awards are far lower than in the United States.51
Fewer Regulations. Excessive health care regulations in the United
States prevent American hospitals from making the sort of collaborative ar-
“Foreign hospitals have
fewer cost-increasing regula-
rangements many international hospitals use. For instance, facilities abroad
tions and cross-subsidies.” can structure physicians’ compensation to create financial incentives for the
doctors to provide efficient care, whereas American hospitals usually cannot.
The reason: Physician compensation arrangements in American hospitals can-
not violate the Stark (anti-kickback) laws.
Foreign hospitals can also employ physicians directly — a practice pro-
hibited by many states.52 For instance, physicians in India contract with hospi-
tals to provide a certain number of hours per month in return for a guaranteed
fixed fee. Patients select the hospital based on reputation and then choose an
appropriate doctor who works with the hospital. In this regard, physicians
depend on hospitals for business rather than the other way around.
FIGURE IV
13.8%
California Hospitals
6.2%
0%
1
Zhongmin Li et al., “Coronary Artery Bypass Graft Surgery in California: 2003 Hospital Data, California CABG
Outcomes Reporting Program, Office of Statewide Health Planning and Development, February 2006.” Available
at http://www.oshpd.cahwnet.gov/HQAD/Outcomes/Studies/cabg/2003Report/2003Report.pdf. Access verified June
22, 2007.
2
The mortality rate for primary isolated CABG is 0.6 percent. See “Welcome to the Department of Cardiovascular
Surgery,” Cleveland Clinic Foundation Web site. Available at https://www.ccf.org/heartcenter/pub/about/specialties/
cvsurgery.asp. Access verified June 22, 2007.
3
Arnold Milstein and Mark Smith, “Will the Surgical World Become Flat?” Health Affairs, Vol. 26, No. 1, January/
February 2007, pages 137-141.
14 The National Center for Policy Analysis
ningham, president of the American Society of Plastic Surgeons, told the U.S.
Senate Select Committee on Aging, “Without a complete understanding of
the medical standards for the health institution or facility, medical providers,
surgical training, credentials, and postoperative care associated with surgery,
a patient can be ill-informed — and worse, at significant risk.”54 In fact,
Cunningham’s warning could easily apply to U.S. hospitals as well. Informa-
tion on quality is not readily available to patients, and what is available is often
difficult to interpret or irrelevant.
Measuring Quality. Despite claims of high U.S. standards, results
“The quality of American vary widely by hospital. Consider one of the most commonly performed
hospitals varies widely.” procedures in the United States today — coronary artery bypass graft (CABG)
surgery:
l Hospitals in California that perform CABG surgery have an aver-
age mortality rate of nearly 3 percent (2.91).55
l The California average is nearly four times higher than the Cleve-
land Clinic, considered the best hospital in the nation by U.S. News
& World Report.56
Closer inspection of California hospitals shows wide variations in quality:57
[See Figure IV.]
l The University of California Davis Medical Center experienced no
deaths among the 136 patients receiving CABG surgery in 2003.
l Fountain Valley’s mortality rate of 2.14 percent was below the state
average of 2.91 percent.
l But Desert Regional Medical Center, which performed a similar
volume of surgeries, had a mortality rate of more than 6 percent
— twice the California average and 10 times Cleveland Clinic’s
average.
l Beverly Hospital performs few CABG procedures, which may
explain its high mortality rate of 13.79 percent.
How does the quality of facilities overseas compare to those in the
United States? Some of the more prestigious providers, such as Apollo Hospi-
“A number of foreign hos- tal Group and Wockhardt Hospitals (which is affiliated with Harvard Medical
pitals are accredited in the
United States.”
School) in India, and Bumrungrad International Hospital in Thailand, offer a
better level of care than the average community hospital in the United States.58
[See the sidebar on Bumrungrad.]
As in the United States, many hospitals abroad do not disclose recog-
nized quality indicators. But most hospitals that compete on the international
level generally do.
l Dartmouth Hitchcock Medical Center in New Hampshire and
Ohio’s Cleveland Clinic have quality indicators on their Web
sites.59
Medical Tourism: Global Competition in Health Care 15
Bumrungrad
Bumrungrad International Hospital in Bangkok, Thailand, is a mod-
ern multispecialty hospital with 554 beds, accredited by the Joint Commis-
comply with U.S. hospital building and safety standards. The medical staff
of more than 900 includes about 200 U.S. board-certified physicians. Many
others hold licenses in Australia, Europe and Japan. A team of 800 nurses
“A number of foreign hos- Bumrungrad tracks more than 500 measures of quality and patient
pitals are accredited in the
United States.” safety. It treats about 430,000 medical tourists a year from 190 different
has 150 clinical exam suites, two cardiac catheterization labs and 19 operat-
ing theaters, two of which are specifically designed for cardiac surgeries.
electronically and fully integrate all areas of patient management and hospi-
tal operations.3
1
Bumrungrad Web site http://www.bumrungrad.com/.
2
Louisa Kamps, “The Medical Vacation,” Travel + Leisure, July 3, 2006.
3
Global Care Solutions Web site http://www.hospital2000.com/.
4
Mark Roth, “$12 for a Half Day of Massage for Back Pain,” Pittsburgh Post-Gazette,
September 10, 2006.
16 The National Center for Policy Analysis
“Some American hospitals Hospital Affiliation. Some foreign hospitals are owned, managed or
have foreign affiliates.” affiliated with prestigious American universities or health care systems:
l The Cleveland Clinic owns facilities in Canada and Vienna, Aus-
tria; and in Abu Dhabi, the clinic already manages an existing facil-
ity and is building a new hospital.69
l Wockhardt (India) is affiliated with Harvard Medical School.70
l Hospital Punta Pacifica in Panama City, Panama, is an affiliate of
U.S.-based Johns Hopkins International.71
l JCI-accredited International Medical Centre in Singapore is also
affiliated with Johns Hopkins International.72
Medical Tourism: Global Competition in Health Care 17
How Globalization Is
Changing the U.S. Health Care System
For the United States, globalization of health care encompasses both
exporting patients (medical tourism) and importing medical services (out-
sourcing). This medical trade has the potential to increase competition and
efficiency in the United States.89 Princeton University health economist Uwe
Reinhardt says the effect of global competition on American health care could
rival the impact of Japanese automakers on the U.S. auto industry — forcing
domestic producers to improve quality and to offer consumers more choices.90
Apart from patient travel, many medical tasks can be outsourced to
skilled professionals abroad when the physical presence of a physician is
unnecessary. This can include long-distance collaboration — incorporating
the services of foreign medical staff into the practices of American medical
providers. Finally, global competitors can build facilities closer to the United
States and selectively contract with U.S. health insurers.
Outsourcing Medical Services. Information technology makes it
possible to provide many medical services remotely, including outsourcing
them to other countries.91 Telemedicine — the use of information technology
to treat or monitor patients remotely by telephone, Web cam or video feed
— is becoming common in areas where physicians are scarce.92 It gives rural
residents access to specialists and will probably become the preferred way to
monitor patients with chronic conditions.
Outsourcing often results in lower costs, higher quality and greater
convenience.93 Some clerical tasks, such as medical transcription — entering
physician notes and dictation into a patient’s electronic medical record — are
20 The National Center for Policy Analysis
visits each year, a limited amount of inpatient care and sometimes coverage
for prescription drugs. Mini-med policies typically cap benefits at a maximum
of about $25,000 annually.114 Since the amounts these policies will pay are
relatively low, patients can expect significant cost-sharing for medical care.
But this provides an incentive for patients to carefully shop to avoid high out-
of-pocket costs.
The unique part of PlanetHospital’s plan is that it will reimburse
patients the same amount for each particular service, regardless of where it is
performed. Thus a patient could significantly lower out-of-pocket costs by go-
“New health plans offer a ing abroad for treatment. For instance, an enrollee who needs a heart proce-
fixed payment per procedure dure could easily spend more than $50,000 at a hospital in the United States.
to encourage patients to shop A mini-med policy may pay only $10,000 toward the cost. But abroad, the
for health care.”
same surgery could cost less than $10,000, including travel, thus making the
mini-med a sensible and affordable alternative. Because coverage is limited,
this policy will cost about $50 to $100 a month, only a fraction of a traditional
health plan.115
PlanetHosptial’s first step will be a health plan aimed at El Salvador-
ans living in the United States. Enrollees would receive a limited number of
primary care visits locally under the plan and could travel to El Salvador for
covered major medical needs. If the plan proves successful, additional ones
will follow for countries such as Mexico and India. Coverage under one of
these “mini-med” plans might cost a family as little as $200 per month.116
Effects of Increased Competition on U.S. Health Care Markets.
Global competition could lower the cost of some medical procedures. At the
same time, increased international competition for qualified medical person-
nel could raise labor costs in the United States. If foreign medical students,
physicians and nurses currently in America choose to work overseas, there
may be shortages of workers in some medical specialties in the United States,
and wages for these workers will rise. This is especially likely in areas of
medicine not easily outsourced.117 For example, radiology is relatively easy to
outsource since it does not require the radiologist to be physically present. Al-
though radiology has been one of the highest-paid specialties in medicine, that
is likely to change in the future since reading X-rays and other scans can easily
be outsourced. On the other hand, outsourcing would have little effect on the
inherently local practice of emergency room medicine.118
Global medical competition could also exacerbate the shortage of pri-
mary care physicians in the United States. Today nearly one-quarter of prac-
ticing physicians in the United States attended a foreign medical school. In-
deed, each year nearly one-quarter of slots in U.S. medical residency programs
are filled by foreigners.119 Greater opportunities in their native countries and
in other countries could reduce the number of foreign physicians (and nurses)
practicing in the United States. It could also encourage more of them to return
Medical Tourism: Global Competition in Health Care 23
home after they receive training.120 Many foreign medical graduates work in
underserved rural areas, so these communities would be especially hard hit.121
Also, due to an ongoing nursing shortage, American hospitals recruit
foreign nurses to fill vacancies.122 A smaller supply of foreign physicians and
nurses willing to work in the United States could strain the U.S. health care
system by raising labor costs.
Effects of Globalization on Health Care in Other Countries. Today
many African countries are experiencing shortages of physicians and nurses.
Because of the opportunity to earn more in Europe and the United States,
many physicians trained in Africa emigrate. More opportunities to work,
higher pay and entrepreneurial opportunities in developing countries could
reduce this brain drain. This would benefit the local populations by increasing
their access to care.
Critics in developing countries claim that health care facilities and pro-
viders that serve medical tourists will treat only foreign patients to the exclu-
sion of native-born poor residents.123 This is unlikely, since most hospitals in
developing countries cannot survive on cash-paying medical tourists alone.124
But even if specific hospitals in developing countries are open only to foreign-
ers and local elites, the health care systems of these countries will be enriched
by the influx of revenue, enabling them to offer local populations increased
access to medical care.125
diologist could read them from a home office. However, the practice of medi-
cine is regulated by state medical boards, which generally require a physician
to be licensed in the state where the patient receives treatment. Thus, state
licensing laws prevent medical tasks from being performed by providers living
in other states or countries. Foreign physicians also lack the authority to order
certain tests, initiate therapies and prescribe drugs that American pharmacies
can legally dispense.
States license and regulate physicians with the ostensible goal of
maintaining the quality of medical care.129 However, state medical boards
are dominated by physicians and, like the boards governing other regulated
“State regulations prevent professions, they tend to benefit the practitioners.130 Besides stringent licens-
out-of-state doctors from ing requirements, these organizations suppress competition among physicians
treating patients.” by declaring certain practices to be unethical.131 Medical societies have long
opposed innovations that pose a threat to their autonomy or income.132 And
threats to hospital revenue or the ability of hospital systems to cross-subsidize
uncompensated care generate considerable opposition.133
Some restrictions on the practice of medicine have been removed in
recent years, but many still exist. For example:
l It is illegal for a physician to consult with a patient online without
an initial face-to-face meeting.134
l It is illegal in most states for a physician outside the state who has
examined a patient in person to continue treating the patient via the
Internet after the patient returns home.
l It is illegal in most states for a physician outside the state to consult
by phone with patients residing in the state if the physician is not
licensed to practice medicine there.
These laws make it difficult for American patients to seek care from
doctors abroad via telephone and the Internet.
Restrictions on Collaboration among Health Care Providers. A
physician practice in the United States could easily provide doctor visits in a
traditional office, coupled with chronic disease management services from a
foreign doctor and tests done at a convenient retail clinic when needed.135 Yet
this scenario might run afoul of the so-called Stark laws. The federal Stark
laws make it illegal for a physician to refer a patient for treatment to a clinic
in which the doctor has a financial interest. It is also illegal for a physician to
reward providers who refer patients to him, or to a hospital in which he has
a financial interest. Unfortunately, laws meant to prevent self-dealing and
kickbacks also inhibit beneficial collaboration between doctors and hospitals.
For instance, the Stark laws could prevent a physician practice from referring
a patient with a chronic condition to an affiliated disease management program
(employing a foreign doctor) or prevent the practice from referring a patient
needing minor treatment to an affiliated walk-in clinic.
Medical Tourism: Global Competition in Health Care 25
FIGURE V
Out-of-Pocket
13%
Government
45%
“Government health pro- Private Insurers/
grams could save money from Employers
medical globalization.”
42%
in health care. States that border Mexico could follow California’s lead and
allow insurers to offer policies that include providers in Mexico. States that
border Canada could follow suit.143
Modernize State Licensing Laws. Medical licensing laws must
conform to the information age, where distance (or country) is irrelevant.144
Reforms should include recognizing standards of other countries as an alter-
native to local licenses. For instance, many Indian and Thai physicians are
board-certified or licensed in the United Sates, Australia, Britain or Canada.
Foreign physicians who meet standard criteria should be considered licensed
if their skills have been evaluated and approved for inclusion in a network.
It does not make sense in the information age for each state to approve and
police physicians living thousands of miles away. The same holds true for
physicians practicing in the United States. Laws that prevent physicians in
one state from consulting with patients in other states by telephone or e-mail
should also be eased.
Relax Laws Restricting Collaboration. The federal Stark laws
prohibiting self-referral should be modified to allow beneficial arrangements
where care is coordinated and provided in a more efficient manner. Without
“Collaboration between revised legislation, it would be difficult to integrate the services of physicians
American and foreign health living abroad into the practices of local providers. Integrated medical services
providers would reduce costs would also allow domestic providers to compete by creating more efficient
and improve quality for U.S.
patients.” operations. For example, a traditional physician practice could offer disease
management for chronic conditions at a lower cost through an associated In-
dian physician. And an American radiologist might have an Indian radiologist
read X-rays at costs lower than competitors.
Encourage Follow-Up Care. While physicians prefer an ongoing
relationship with a patient, outsourcing patients to providers abroad is not
much different than referring them to a specialist down the street. If “safe
harbor” contracts were created for physicians providing follow-up care,
more doctors would be willing to treat cash-paying patients. Moreover, if
the number of medical tourists rises significantly, entrepreneurial physicians
and clinics will sense an opportunity to provide follow-up care. To facilitate
providing follow-up care for patients who return from treatment abroad, a
committee of the American Medical Association has recommended creating a
current procedural terminology (CPT) reimbursement code for patients who
need postoperative follow-up care.145
Facilitate Liability by Contract. Some American patients may be
concerned about the potential difficulty of holding providers accountable in
foreign legal systems (malpractice liability) and of receiving compensation
for complications that will undoubtedly arise from medical treatment abroad..
Federal law needs to recognize patient contracts that provide for binding arbi-
tration or that limit liability. For instance, patients could purchase additional
28 The National Center for Policy Analysis
insurance from their health insurer in an amount they believe will protect them
in the event of predefined problems that might occur from foreign treatment.
A policy could clearly identify financial remedies for specific problems similar
to an accidental death and dismemberment policy.
Allow Financial Incentives. Lately, some insurers have begun creat-
ing low-cost health plans that rely on foreign-based providers to treat serious
ailments. Unfortunately, lawyers could interpret ERISA and HIPAA (Health
Insurance Portability and Accountability Act) regulations in ways that discour-
“Financial incentives would
allow patients to share the
age employers (and health plans) from providing patients with financial incen-
savings from globalization.” tives to travel abroad for lower-cost care. Insurers and self-insured employers
should have the right to experiment with a range of health benefits that inject
global competition into health care. In addition, insurers, health plans and
self-insured employers that have facilitated the overseas treatment of willing
patients should be protected from liability.
Lead by Example. The federal and state governments should lead by
example by allowing Medicare and Medicaid programs to send willing patients
abroad. Medicare would particularly benefit from cost savings since it pays
for a large volume of orthopedic and cardiac procedures.
Conclusion
The number of uninsured and self-pay patients traveling abroad for
health care has grown rapidly over the past few years. This trend is likely
to continue as medical care becomes more expensive or difficult to obtain in
countries such as the United States where third-party payment is the norm.
It is unrealistic to assume that every American will travel abroad for medi-
cal care.146 But it doesn’t require huge numbers to induce change. If only 10
percent of the top 50 low-risk treatments were performed abroad, the U.S.
health care system would save about $1.4 billion annually.147 As more insured
patients begin to travel abroad for low-cost medical procedures, medical tour-
ism will result in competition that is sorely needed in the American health care
industry.
Notes
1
McKinsey & Company and the Confederation of Indian Industry, cited in Laura Moser, “The Medical Tourist,” Slate,
December 6, 2005, and Bruce Stokes, “Bedside India,” National Journal, May 5, 2007.
2
See Dudley Althaus, “More Americans Seeking Foreign Health Care Services,” Houston Chronicle, September 4, 2007.
3
McKinsey & Company and the Confederation of Indian Industry, cited in Laura Moser, “The Medical Tourist,” and Bruce
Stokes, “Bedside India.”
4
Mark Roth, “$12 for a Half Day of Massage for Back Pain,” Pittsburgh Post-Gazette, September 10, 2006.
5
McKinsey and the Confederation of Indian Industry, Press Trust of India, 2005.
6
Joshua Kurlantzick, “Sometimes, Sightseeing Is a Look at Your X-Rays,” New York Times, May 20, 2007.
7
“Medical Tourism Growing Worldwide,” U Daily (University of Delaware), July 25, 2005. Available at http://www.udel.edu/
PR/UDaily/2005/mar/tourism072505.html. Accessed May 22, 2007.
8
Malathy Iyer, “India Out to Heal the World,” Times of India, October 26, 2004.
9
Jessica Fraser, “Employers Increasingly Tapping Medical Tourism for Cost Savings,” News Target, November 6, 2006.
10
“Who Can Have Fertility Treatment?” BBC Health, undated. Available at http://www.bbc.co.uk/health/fertility/features_who-
can.shtml. Accessed April 30, 2007. Also see “Cost of Fertility Treatment,” 2006. Available at http://www.gettingpregnant.
co.uk/cost_information.html. Accessed April 30, 2007.
11
Arnold Milstein and Mark Smith, “Will the Surgical World Become Flat?” Health Affairs, Vol. 26, No. 1, January/February
2007, pages 137-41.
12
Arnold Milstein and Mark Smith, “America’s New Refugees — Seeking Affordable Surgery Offshore,” New England Journal
of Medicine, Vol. 355, No. 16, October 19, 2006.
Neal Conan (host), “Outsourcing Surgery,” National Public Radio, Talk of the Nation, March 8, 2007. Available at http://
13
opticians and dentists. See Milan Korcok, “Cheap Prescription Drugs Creating New Brand of U.S. Tourist in Canada, Mexico,”
Canadian Association Medical Journal, Vol. 162, No. 13, June 27, 2000; Steven Gluck “Bargain Dentistry — Wooden Teeth
Anyone?” eZinearticles.com, February 22, 2006. Available at http://ezinearticles.com.
For instance, in the United States 97 percent of hospital charges are paid by third parties. Devon M. Herrick and John C.
18
Goodman, “The Market for Medical Care: Why You Don’t Know the Price; Why You Don’t Know about Quality; And What
Can Be Done about It,” National Center for Policy Analysis, Policy Report No. 296, March 12, 2007.
19
Manuel Roig-Franzia, “Discount Dentistry, South of the Border,” Washington Post, June 18, 2007.
20
Devon Herrick, “Health Plans Adding Foreign Providers to Their Networks,” Health Care News, July 1, 2007. Also see Fra-
ser, “Employers Increasingly Tapping Medical Tourism for Cost Savings.”
21
Roig-Franzia, “Discount Dentistry, South of the Border.”
22
Alfredo Corchado and Laurence Iliff, “Good Care, Low Prices Lure Patients to Mexico,” Dallas Morning News, July 28,
2007.
23
Ibid.
24
Chris Hawley, “Seniors Head South to Mexican Nursing Homes,” USA Today, August 16, 2007.
Devon Herrick (moderator), Milica Bookman and Rudy Rupak, “Global Health Care: Medical Travel and Medical
25
Outsourcing,” National Association for Business Economics, Health Economics Roundtable Teleconference, July 25, 2007.
30 The National Center for Policy Analysis
Available at http://www.nabe.com/podcasts/070725hrt.mp3. Accessed July 27, 2007.
26
Figures for July 2005. See “World Factbook: Costa Rican People,” Yahoo.com, 2007.
27
“Health Care in Panama,” International Living, undated. Available at http://www.internationalliving.com/panama/healthcare.
html. Accessed July 27, 2007.
28
Catherine Keogan, “Panama’s Health Tourism Boom,” EzineArticles, May 31, 2007.
29
There is currently a moratorium on building new specialty hospitals because it is thought they drain away lucrative, less acute
cases from community hospitals. Yet there is little debate that this competition improves quality. For a discussion of specialty
hospitals, see Leslie Greenwald et al., “Specialty Versus Community Hospitals: Referrals, Quality, And Community Benefits,”
Health Affairs, Vol. 25, No. 1, January/February 2006.
30
Some of these include: GlobalChoiceHealthCare.com, MediTourInternational.com, Indomedics.com, QuestMedTourism.com,
MeritGlobalHealth.com, MyCareWeb.com, MedJourneys.com, HealthBase.com, MeSisOnline.com, GlobalMedicalServices.
us, MedSourceIntl.com, MedicalNomad.com, AxiomHealth.org, HealthTraveler.net, HospitalBiblicaMedicalTourism.com,
MyNovus.com, Medical-Tourism.FiveSites.com, 5Greatest.com, Surgicalcareinternational.com, Companionglobalhealthcare.
com, Thailandvacationtour.com, Virginia.IQmedica.com, UniversalSurgery.com, Medical-Tourism-Guide.com, Bairesalud.com,
TreatMeAbroad.com, Medical-travel-asia-guide.com and MediTourIndia.net.
31
Krysten Crawford, “Medical Tourism Agencies Take Operations Overseas,” Business 2.0 Magazine, August 3, 2006.
32
Julie Davidow, “Cost-Saving Surgery Lures ‘Medical Tourists’ Abroad,” Seattle Post-Intelligencer, July 24, 2006.
33
Jennifer Alsever, “Basking on the Beach, or Maybe on the Operating Table,” New York Times, October 15, 2006.
34
Sarah Dawson with Keith Pollard, “Guide to Medical Tourism,” TreatmentAbroad.net, 2007; and http://www.
cosmeticplasticsurgerystatistics.com/costs.html.
35
At an average of about $1,038, an MRI for breast cancer screening costs about 10 times more than a mammogram. See
Sylvia K. Plevritis et al., “Cost-Effectiveness of Screening BRCA1/2 Mutation Carriers with Breast Magnetic Resonance
Imaging,” Journal of the American Medical Association, Vol. 295, No. 20, May 24/31, 2006, Table 3. Also see Devon Herrick,
“Medical Tourism Prompts Price Discussions,” Health Care News, October 1, 2006.
36
Bruce Stokes, “Bedside India,” National Journal, May 5, 2007.
37
Steven Berger, “Analyzing Your Hospital’s Labor Productivity,” Healthcare Financial Management, April 2005.
38
Bruce Stokes, “Bedside India.”
39
Ibid.
40
Herrick and Goodman, “The Market for Medical Care.”
Centers for Medicare and Medicaid Services, “National Health Expenditures by Type of Service and Source of Funds:
41
Outcomes Reporting Program, Office of Statewide Health Planning and Development, February 2006.” Available at http://
www.oshpd.cahwnet.gov/HQAD/Outcomes/Studies/cabg/2003Report/2003Report.pdf. Access verified June 22, 2007.
58
Harvard Medical International’s Web site is http://www.hmi.hms.harvard.edu/about_hmi/overview/index.php.
59
See http://www.dhmc.org/qualitymeasures/ and http://www.clevelandclinic.org/quality/outcomes/.
60
“Recognition of Our Clinical Achievements,” National Healthcare Group (Singapore), 2006, Clinical Quality Measures.
61
Apollo Hospital Group Web site. Available at http://www.apollohospitals.com/QualityAssurance.asp. Access verified June
22, 2007.
62
Herrick, “Medical Tourism Prompts Price Discussions.”
63
These hospitals used the Global Care Solutions’ software.
64
Richard Hillestad et al., “Can Electronic Medical Record Systems Transform Health Care?” Health Affairs, Vol. 24, No. 5,
September/October 2005, pages 1,103-17.
65
Herrick and Goodman, “The Market for Medical Care.”
66
Joint Commission International Web site: http://www.jointcommissioninternational.com/
Julie Appleby and Julie Schmit, “Sending Patients Packing,” USA Today, July 27, 2006. Since this article appeared, the Joint
67
Heart.”
91
Grant Gross, “Analyst: Outsourcing Can Save Costs in Health Care,” InfoWorld, November 16, 2004.
For a discussion on telemedicine, see Anthony Charles Norris, Essentials of Telemedicine and Telecare (New York: John
92
msn.com/id/6621014/. Accessed April 27, 2007. See Nighthawk Radiology Services Web site: http://www.nighthawkrad.net/.
96
Robert M. Wachter, “International Teleradiology,” New England Journal of Medicine, Vol. 354, No. 7, February 16, 2006,
pages 662-63; Milstein and Smith, “Will the Surgical World Become Flat?”
97
“NHS Scans to be Sent Abroad” BBC News, July 9, 2004.
98
Conversation with Rudy Rupak, president of PlanetHospital, Spring 2007.
99
For instance, see Gina Kolata, “Looking Past Blood Sugar to Survive with Diabetes,” New York Times, August 20, 2007.
100
For instance, a doctor and nurse practitioner working as a team were better able to manage chronic conditions than a physi-
cian working alone. See David Litaker, “Physician-nurse practitioner teams in chronic disease management: the impact on
costs, clinical effectiveness, and patients’ perception of care,” Journal of Interprofessional Care, Vol. 17, No. 3, August 2003,
pages 223-37.
101
Jane Anderson, editor, “Use of Telemedicine Tools Grows within DM,” Disease Management News, Vol. 12, No. 8, 2007.
102
For instance, children assigned to interactive disease management for asthma fared better than those in a control group with
traditional disease management. See Ren-Long Jan et al., “An Internet-Based Interactive Telemonitoring System for Improving
Childhood Asthma Outcomes in Taiwan,” Telemedicine and e-Health, Vol. 13, No. 3, June 2007, pages 257-68.
Medical Tourism: Global Competition in Health Care 33
103
Fraser, “Employers Increasingly Tapping Medical Tourism for Cost Savings.”
104
Arnold Milstein, Written Testimony to the U.S. Senate, Special Committee on Aging, June 27, 2006.
Herrick, Bookman and Rupak, “Global Health Care: Medical Travel and Medical Outsourcing.” Also see Bookman and
105
Bookman, Medical Tourism in Developing Countries (New York: Palgrave Macmillan, August 7, 2007).
Interview with Elise Anderson, spokeswoman for BlueShield of California, May 4, 2007. Also see Herrick, “Health Plans
106
Corchado and Iliff, “Good Care, Low Prices Lure Patients to Mexico.”
Sarah Skidmore, “Cross-Border Health Insurance Is a Hit with Employers and Workers,” San Diego Union-Tribune, October
109
16, 2005.
“BlueCross BlueShield and BlueChoice HealthPlan Pioneer Global Healthcare Alternative,” BlueCross BlueShield of South
110
moderate-income families and small employers, uses a limited benefit plan with an annual cap of $25,000. An actuary from the
consulting firm Milliman USA estimates that only 2 percent of enrollees are likely to exceed the $25,000 cap in any given year.
115
See Chad Terhune, “Covering the Uninsured, But only up to $25,000,” Wall Street Journal, April 18, 2007.
116
Herrick, Bookman and Rupak, “Global Health Care: Medical Travel and Medical Outsourcing.”
Herrick, Bookman and Rupak, “Global Health Care: Medical Travel and Medical Outsourcing.” Also see Bookman and
117
Medical Graduates In Physician Shortage Areas,” Health Affairs, Vol. 22, No. 5, September/October 2003, pages 241-249.
Heather Stringer, “Foreign Investments,” Nurse Week, June 6, 2002. Also see Morgan Lee (Associated Press), “Foreign
122
devised a set of recommendations for medical travel. See “Medical Travel Outside the U.S.” June 2007. Available at http://
www.ama-assn.org/ama1/pub/upload/mm/21/a07rep-b.pdf. Accessed September 18, 2007.
127
Medicare benefits are not available to seniors living or traveling abroad. State Medicaid programs do not cover services
provided outside the United States.
128
Milstein and Smith, “Will the Surgical World Become Flat?”
129
Paul B. Ginsburg and Ernest Moy, “Physician Licensure and the Quality of Care: The Role of New Information
Technologies,” Regulation, Cato Institute, Vol. 15, No. 4, Fall 1992. For a literature review of the history of medical licensure,
see John C. Goodman and Gerald Musgrave, Patient Power: Solving America’s Health Care Crisis (Washington, D.C.: Cato
34 The National Center for Policy Analysis
Institute, 1992).
130
Economists argue that government regulators are often “captured” by the industries they regulate. Once captured, the
regulators tend to protect the interests of the industry to the detriment of the people they are supposed to protect. Allowing
small groups of physicians, backed by the power of law, to decide who practices medicine and what constitutes the safe practice
of medicine may reduce quackery. But it also is likely to reduce competition and innovation — and protect the incomes of
physicians. See Reuben Kessel, “Price Discrimination in Medicine,” Journal of Law and Economics, Vol. 1, October 1958,
pages 20-53.
131
Kessel, “Price Discrimination in Medicine.” The theory is that price-cutting would lead to a situation where fees would be
too low for a physician to render quality services. For a review of health insurance regulation, see John C. Goodman, The
Regulation of Medical Care: Is the Price Too High? (San Francisco, Calif.: Cato Institute, 1980). Also see Greg Scandlen, “100
Years of Market Distortions,” Consumers for Health Care Choices, May 22, 2007.
For instance, many providers oppose telemedicine. See Mary Schmeida, Ramona McNeal and Karen Mossberger, “Policy
132
Determinants Affect Telehealth Implementation,” Telemedicine and e-Health, Vol. 13, No. 2, April 2007, pages 100-107.
133
Stokes, “Bedside India.”
The American Medical Association (AMA) has come out against prescribing medication over the Internet prior to a physical
134
examination. Richard F. Corlin, President, American Medical Association, letter to the editor, “AMA to The Wall Street Journal:
Shut Down Illegal Internet Pill Pushers,” Wall Street Journal, November 6, 2001.
135
For example, a patient with a chronic condition might prefer a convenient location to have blood pressure taken or blood
drawn. A foreign physician might work for a primary care physician and manage a chronic condition for the patient.
136
Josef Woodman, “Medical Travel Safe for Informed Consumer,” The Tennessean, May 4, 2007.
137
Interview with Rudy Rupak of PlanetHospital.
138
Herrick, “Medical Tourism Prompts Price Discussions.”
139
Joseph Marlowe and Paul Sullivan, “Medical Tourism: The Ultimate Outsourcing,” AON Consulting, Forum, March 2007.
Ibid. Currently, patients pay less for in-network hospitals compared to selecting the best hospital that may not be in the
140
and filed the remainder of the report, June 2007. Available at http://www.ama-assn.org/ama1/pub/upload/mm/21/a07rep-b.pdf.
Accessed September 18, 2007.
146
Milstein and Smith, “Will the Surgical World Become Flat?”
147
Mattoo and Rathindran, “How Health Insurance Inhibits Trade in Health Care.”
Medical Tourism: Global Competition in Health Care 35
Devon Herrick, Ph.D., is a senior fellow with the National Center for Policy Analysis. He con-
centrates on such health care issues as Internet-based medicine, health insurance and the uninsured, and
pharmaceutical drug issues. His research interests also include managed care, patient empowerment,
medical privacy and technology-related issues. Herrick also serves as the Chair of the Health Econom-
Herrick received a Ph.D. in Political Economy and a Master of Public Affairs degree from the
University of Texas at Dallas with a concentration in economic development. He also holds an M.B.A.
with a concentration in finance from Oklahoma City University and an M.B.A. from Amber University,
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